{"id":31266,"date":"2018-11-13T14:28:54","date_gmt":"2018-11-13T19:28:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/can-ai-save-brick-and-mortar-retail\/"},"modified":"2018-11-13T14:28:54","modified_gmt":"2018-11-13T19:28:54","slug":"can-ai-save-brick-and-mortar-retail","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/can-ai-save-brick-and-mortar-retail\/","title":{"rendered":"Can AI save brick-and-mortar retail?"},"content":{"rendered":"

What is the future, if any, of brick-and-mortar retail? With recent headlines such as the Sears bankruptcy and the penetration of e-commerce, traditional brick-and-mortar retail has experienced serious headwinds. The retail industry is \u201cundergoing a major renaissance\u201d that has been \u201cfueled by exponential advancement in technology\u201d.[1]<\/a>\u00a0With a background in real estate private equity covering retail and studying this transition, I have a fascination with what this retail future might look like. Kristina Lake, Stitch Fix\u2019s CEO, noted the necessity for retailers to invest in the future of their business or they \u201cmight suffer Blockbuster\u2019s fate\u201d.[2]<\/a><\/p>\n

Neiman Marcus, the luxury department store retailer, is seeking to combat these retail headwinds through technological innovation, leveraging artificial intelligence (\u201cAI\u201d) and machine learning to create a seamless and personalized experience for its customer. They are using innovation as a competitive advantage in a future where some believe traditional retail may cease to exist.[3]<\/a> According to Business Insider Intelligence, spending by retailers on AI is expected to reach over $5B by 2022, with AI projected to boost profitability by nearly 60% for retail by 2035.[4]<\/a><\/p>\n

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Neiman Marcus published growth priorities clearly focusing on digital innovation, their online presence, and omnichannel customer experience\u00a0[5]<\/a><\/figcaption><\/figure>Neiman Marcus, more so than its department store peers, has made a commitment to investing in digital innovation with the joint goal of discovering not just the store<\/em> of the future but also serving the customer<\/em> of the future everywhere the customer is.[6]<\/a>\u00a0Retailers are increasingly focused on providing an omnichannel experience to its customers, a seamless experience between all of its touch points, including in-store, online and by mobile. Currently, Neiman Marcus is leveraging AI to improve the process of the shopping experience at every customer touchpoint. Neiman Marcus seeks to balance AI-driven personalization with the experience that customers expect from a luxury brand, utilizing AI to stream content to shopper\u2019s devices and machine learning to understand consumer behavior. This includes using machine learning to predict customer preferences and target directed emails, but also serves to support the sales associates who can provide a more tailored experience given the data provided to them.[7]<\/a><\/p>\n

Neiman Marcus is using AI to triangulate data acquired about their customer by leveraging \u201cdigital exhaust,\u201d data from daily interactions people have with their devices, as well as in-store information to produce a highly personalized shopping experience.[8]<\/a> Personalization is important in creating brand loyalty, increasing likelihood to buy, and creating a frictionless shopping experience. In the near term, Neiman Marcus is attempting to synthesize all of the data sources it has about its customer to provide a highly personalized and seamless experience through every channel.<\/p>\n

Snap, Find, Shop app feature\u00a0[9]<\/a><\/figcaption><\/figure>In 2012, Neiman Marcus opened the innovation lab (\u201cthe iLab\u201d) to invest in both the short and long term innovations for the company. For example, one product recently introduced is their \u201cSnap, Find, Shop” feature on their mobile app, which utilizes visual search, allowing customers to take a photo of something they like and producing similar items in the Neiman Marcus inventory. This feature has increased app usage and engagement with the brand. Another innovation is their Memory Mirror, a giant video screen that allows a shopper to see an outfit in 360 degrees and, send to friends or family or see the outfit in different colors. This is an attempt to improve the experiential element of connecting online and in-store shopping.<\/p>\n

Currently, Neiman Marcus has primarily utilized machine learning to focus on process improvement of the shopping experience. One suggestion in the near term is for Neiman Marcus to continue to converge the best things about an online and in-store shopping, using the data and predictive suggestions that are available online to also be available to a consumer in a store, such as suggested items based on past shopping. Looking forward, Neiman Marcus should also consider the use of AI for product development. Through their multiple touch points with the customer, they are getting feedback on what their customers are interested in and can use this information to predict the patterns and styles they should be offering to their future consumer to support product design.<\/p>\n

Investing in digital innovation and focusing on the customer experience is critical for the future success of retailers and Neiman Marcus has been a leader in adopting innovation as a competitive advantage.<\/p>\n

Yet questions remain:<\/p>\n